Benefits rising twice as fast as salaries: Payments to unemployed jumped by 20% in five years

Benefits rising twice as fast as salaries: Payments to unemployed jump by 20% in five yearsJobseeker's Allowance up 20 per cent from 59.15 a week in 2007/08 to 71In the same five-year period wages only rose by 12 per centIana Duncan Smith said the system is not fair on workers

By
Gerri Peev

PUBLISHED:

00:01 GMT, 2 January 2013

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UPDATED:

09:49 GMT, 2 January 2013

Welfare handouts to those languishing on the dole have risen almost twice as fast as average wages over the past five years.

Out-of-work benefits have jumped in value by an astonishing 20 per cent since 2007 while wages have crept up by just 12 per cent, official figures released last night reveal.

Work and Pensions Secretary Iain Duncan Smith said the figures proved that automatically increasing benefits by the rate of inflation, as has previously been the case, was ‘not fair’ on working people whose taxes fund the handouts.

No work pays off: Jobseeker's Allowance has risen by 20 per cent, from 59.15 a week in 2007 to 71

Ministers are now battling to reform the system and impose a 1 per cent cap on out-of-work benefit increases for the next three years, but face opposition from Labour.

Mr Duncan Smith said yesterday: ‘Working people across the country have been tightening their belts after years of pay restraint while at the same time watching benefits increase. That is not fair.

‘The welfare state under Labour effectively trapped thousands of families into dependency as it made no sense to give up the certainty of a benefit payment in order to go back to work.’

The disparity between those in work and those on welfare is laid bare by the figures from the Department for Work and Pensions.

While working families have faced a
greater squeeze on their income from inflation, benefit claimants have
been cushioned from the soaring cost of living by automatic
inflation-linked rises in their payments.

'Not fair': Work and Pensions Secretary Iain Duncan Smith said the new 1 per cent cap on jobseekers' handout increases was necessary to make the system fair towards taxpayers

Over the past five years, Jobseeker’s Allowance rose by 20 per cent from 59.15 a week in 2007/08 to 71 in 2012/13.

Last year alone, out-of-work benefits rose by 5.2 per cent, while average earnings increased by 1.7 per cent – just one-third the rate.

Meanwhile, across the whole economy, weekly earnings went up from 392 in 2007 to 441 in 2012.

Ministers argue that the figures underline their case that Labour’s welfare system provided a disincentive to claimants to take a job.

A new Universal Credit scheme, to be introduced in stages from April, will replace most existing out-of-work benefits and is designed to ensure that it always pays to work. Unifying taxes and benefits into one system, it will also prevent total benefits from exceeding the average wage.

The new figures will also strengthen the case for the Government’s decision to cap benefit increases to 1 per cent.

Unfair increase: Whilst state handouts for jobless have risen by 20 per cent, wages are only up by 12 per cent since 2007

Chancellor George Osborne faced criticism from Labour and the unions for the decision, announced in his Autumn Statement last month. Labour has vowed to vote against the 1 per cent rise when the measure is debated in Parliament early this year.

But ministers insist it would be unaffordable to allow benefits to continue to outstrip wages, as well as unfair.

Private sector pay has stagnated during the recession, while the public sector has been subject to a three-year pay freeze.

Labour argues that the new benefits cap will hit millions of working families on low incomes whose tax credits will also be capped. The party’s work and pensions spokesman, Liam Byrne, said the move would mean some part-time workers would be better off on benefits.

Mr Duncan Smith said the new Universal Credit system would ensure fairness, adding: ‘This Government is restoring fairness to the system and Universal Credit will ensure it always pays to be in work.’

Mr Osborne is determined to shave a further 10billion from the welfare bill, on top of an 18billion reduction in benefits already in place, after a more downbeat than expected economic forecast.

The cost of increasing benefits in line with inflation since the 2008 recession has been 6.3billion. In 2009 alone, the Labour government raised means-tested benefits – not pensions – by 6.3 per cent.

Overall, more than 90billion is spent on working age welfare every year, the same as the entire education budget.